REPORT OF THE

Cabinet / Leader

PART II

LYONS INQUIRY INTO LOCAL GOVERNMENT

An inquiry into local government funding was established in July 2004 led by Sir Michael Lyons, the remit of which was to consider the detailed case for changes to the present system of local government funding. A report was due to be submitted to the Chancellor of the Exchequer and the Deputy Prime Minister by the end of December 2005. However, in September 2005 the Government extended the remit of the inquiry to include the role and functions of local government following the Government's decision to postpone the revaluation of council tax which had been due for implementation in April 2007. Therefore, the final report deadline was put back to the end of December 2006. Subsequently, the inquiry published a consultation paper and interim report in December 2005, the deadline for responses being 13 March 2006. The interim report was set out in line with the extended terms of reference of the inquiry by including separate parts on the local government role and functions, and local government funding.

At its meeting on 27 February 2006, the Cabinet considered the recommended response of the County Council to the inquiry's interim report. The response to Part 1 on the local government role and functions was set at a strategic level in respect of a number of specific questions and highlighted five key issues relating to the role of local government namely: relationship of trust - national standards and local determination; focus on outcomes; responsibility with authority; provision of local services and public understanding and the democratic mandate. Part 2 of the interim report identified a number of key issues relating to local government funding and invited respondents to express a general view on the issues.

In respect of the interim inquiry report, the Cabinet emphasised a number of views and concerns, particularly their strongly held view of what the key principles of a local government tax should be: fairness, simplicity, visibility and accountability. The need for local government or other local providers to have the ability to decide how outcomes of agreed initiatives were achieved rather than having a prescriptive methodology imposed by the Government was of prime importance, as was the need for strong leadership within partnerships to ensure that such groups perform and respond to an overall strategy. Of particular concern were the flaws in the current arrangements for assessing needs and equalising resources in the grant system, as was the proposal to introduce a local income tax alongside the present council tax. Apart from a local income tax being very complex to administer, it could also have undesirable economic effects such as on young people who had high levels of mortgage debt.

The Cabinet approved a response that reflected their views and concerns. A copy of the substantive response submitted to Sir Michael Lyons to meet the consultation deadline of 13 March 2006 is attached as Appendix 1 to this report. The decision taken to respond to this key piece of national consultation enables the County Council to put forward its views thus aiming to influence the environment in which all aims of its Corporate Strategy must be delivered.